July 26, 2014

The American Dream Is Almost Dead

Back in the 1950s, people believed in the American Dream. Tax rates for the wealthy were at 90 percent, veterans had good benefits, and strong unions had created a healthy middle class. By the 1960s, even the Republicans voted for civil rights, and the country moved forward. Fifty years later, the American Dream is most likely dead. Two-thirds of the people in the United States think that the next generation will not be better off that their own.

An article in USA Today has directed attention toward the disappearance of the dream in the wealthiest nation in the world. According to an analysis of living expenses in the nation, the price tag for the American Dream is $130,357 a year for a family of four. Only 16 million U.S. households earned that much in 2013, according to the U.S. Census Bureau. That means that only one out of 8 people in the U.S.—12 percent—achieve this goal.

The American Dream has always included owning a home. For a home that costs $275,000 (the median price) with 10 percent down and a 4-percent, 30-year mortgage, the family pays $17,062 a year. Groceries would run $12,659, and one car would cost $11,039. Those with other essentials take $58,491. The extras did include restaurant expenses, but only $70 per week—for four people. Taxes—federal, state, local, sales, and property—would run about 30 percent of the $130,000. The article also factored in $22,500 savings each year, $5,000 of that for the children’s college expenses.

Obviously, people could not save, spend less on entertainment and restaurants, and live in a cheaper house. But that’s not the American Dream, and that’s not the way that people lived in the 1950s. Also people live cheaper in places like Oklahoma City and Cleveland than in San Francisco and New York. To make an annual salary of $130,000, a person would require a $65 hourly wage, considered ridiculous. Yet the prices have gone up far faster than workers’ salaries.

With the median household income is $51,000, people are far below a living wage. Almost 50 million people in the country are below the poverty level, an almost 50 percent increase since George W. Bush became president.

Conservatives still promote the belief that people can achieve the American Dream if they just work hard enough. Studies show that they are wrong. A Johns Hopkins University study, documented in The Longest Shadow, followed almost 800 Baltimore schoolchildren for 25 years starting in the early 1980s. The poor stayed poor, and only four percent of urban disadvantaged youth graduated from a four-year college.

Karl Alexander, research professor of sociology at Johns Hopkins University, said that upward mobility is much more limited in the U.S. than in other industrialized countries. In the United States, where people live is as much an indicator of success as how much they work. For example, people are better off in California than in South Carolina. Kids born into the bottom 20 percent of households, for example, have a 12.9 percent chance of reaching the top 20 percent if they live in San Jose (CA) but only a 4.4 percent chance if they live in Charlotte (NC).

Factors influencing the differences in upward mobility:

Race: The larger the black population, the lower the upward mobility. That holds true for all races living in areas that are predominantly black.

Segregation: The greater the isolation, the less chance people have to get to good jobs and good schools. The more sprawl, the less willingness on the part of higher-income people to invest in solutions such as public transit.

Social Capital: Living near the middle class also brings better institutions with a better safety net and services. For example, Utah’s vast Mormon culture creates better upward mobility.

Inequality: The bigger the gap between the poor and rich (as compared to the super rich) the less of a chance that upward mobility can occur. It’s easier to jump up from the bottom if the top isn’t as far away.

Family Structure: Top on the reasons for upward mobility is families. Children have the best chance in stable, two-parent homes. Notice the word “stable.” That contradicts the conservative theory that women should marry just anyone in order to improve their personal finances.

For the past half century, far-right conservatives have worked to destroy unions so that the top 1 percent can get richer. Membership has gone from 25 percent in the private workforce of the 1940s to the current 6.7 percent—and the rate is still moving down.

In two months, United Airlines, the continent’s third largest airline, will outsource 630 of its gate agent jobs at 12 airports to private companies. The union workers who are making up to $50,000, the median wage, will be replaced by non-union workers who will make between $9 and $12.50 per hour. These people will become part of the working poor, needing government aid such as food stamps and Medicaid to survive. The airline makes the money, and the taxpayers fill in the gaps.

The fast-food industry already takes in $243 billion every year from taxpayers because the companies refuse to pay living wages. Wal-Mart costs taxpayers between $900,000 and $1.75 million per store so that it can make $35,000 profit every minute.

Even without unions, there are ways to stop companies from ripping off taxpayers, increase the economy, and move people upward toward the American Dream.

Raise the minimum wage: Of the 13 states (Arizona, Connecticut, Colorado, Florida, Missouri, Montana, New Jersey, New York, Ohio, Oregon, Rhode Island, Vermont, and Washington) that raised their minimum wage in January, only one, New Jersey, saw a decrease in employment during the first half of this year. The other 12 saw speedier job growth in the first half of 2014 compared to 2013 than states that didn’t raise their wages.

Take away corporate tax benefits and breaks from all corporations that have even one full-time employee qualifying for food stamps or Medicaid: Instead of punishing people who get paid a poverty wage, shame the companies that keep their workers in poverty.

As for unions, repealing the Taft-Hartley Act would allow workers to unionize and keep taxpayers from having to pay part of workers’ wages through food stamps and Medicaid.

A new type of union, micro-unions, is growing in popularity, and the National Labor Relations Board (NLRB) is recognizing their formations. The first one was created in 2011 at the rehabilitation center Specialty Healthcare where nursing assistants wanted to organize. This week, the NLRB recognized a small group of Macy’s employees, much to the dismay of industry groups. They claim that chaos will result if companies are forced to bargain with multiple unions at the same work site, but the reason is that employees are finding a way to unionize. Their objection is to what they call “gerrymandering,” a practice satisfactory to conservatives in private education and political voting units.

We’ll hear more about micro-unions. In April and June, bills have been introduced in Congress to block micro-unions. Sen. Lindsey Graham (R-SC) plans to introduce an amendment to the appropriations bill to stop them on the premise that they hurt the American worker. Graham represents the state with extremely low economic mobility. The 6th Circuit Court of Appeals has already upheld NLRB’s earlier ruling for micro-unions. It’s the next fight against re-creating the middle class in the United States.

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You have one error in your story. Charlotte is in North Carolina, not South Carolina.

I agree completely about the damage Republicans have done, but question some of your figures. You say that the median price for a home is more than $200,000. There are plenty of places in the country where one can own a decent home for half that, or less.

I am also in full agreement that companies who pay their workers so little that they have to apply for food stamps should not be rewarded with any tax breaks at all. WalMart comes to mind. We also need to start making it very expensive for companies to close plants here and move them overseas and then import the goods back into the United States. And, we need to put a stop to companies and individuals who hide their money in offshore and overseas accounts to avoid paying taxes.

Thanks for the correction: it’s been fixed. I agree that there are places where people pay less for a house–but there are also places where they pay much more. In examining median prices for different states, the lowest median monthly cost for a mortgage is over $900. That’s a savings of less than $7,000 a year over what was indicated in the article.